Foreclosure drops help housing market recover

In the past few months, there have been significant strides in the recovery of the nationwide housing market in a number of different ways. Part of that improvement has come as a result of fewer homeowners being behind on their mortgage payments.

While experts believe there is still a long way to go toward the housing market being anywhere near its pre-crisis levels, recovery has been strong in the last year, based on several factors, according to new data from the real estate tracking firm Trulia. Among those areas is a significant decline on both an annual and monthly basis in instances of consumer delinquency and default. Two other improving areas were both sales of existing homes, and construction starts for new houses. And the good news for homeowners is that recovery is picking up speed.

“In October 2012, all three housing measures improved: Construction starts increased again, existing-home sales rose, and the delinquency plus foreclosure rate dropped considerably,” wrote Jed Kolko, the chief economist at Trulia. “Even though construction and sales declined month-over-month in the Northeast region, stronger activity in the rest of the country outweighed the impact of Hurricane Sandy.”

Consumers catching up

Through the end of October, 10.64 percent of all mortgages across the country were either delinquent or in some stage of the foreclosure process, the report said. While that number may seem rather high, it’s still down from the 11.27 percent observed in September, and the 11.88 percent from October 2011.

Further, the combined delinquency and foreclosure rate on consumers’ mortgages is now at the lowest level seen in the last four years, the report said.

Existing-home sales and construction

Sales of existing homes increased 2 percent in October to a total of 4.79 million properties, even after a slight decline seen in September, the report said. That’s only slightly lower than the number observed in August, when sales ticked to 4.83 million, the highest since the recession began. Further, home sales are in better shape than delinquency and foreclosure, growing to 59 percent of the pre-crisis levels.

At the same time, builders started more home construction projects last month, indicating there may be a growing appetite among consumers to continue buying new properties in addition to existing ones, the report said. Housing starts rose to 894,000 last month, up 4 percent from September and 42 percent from October 2011. However, they’re still only hovering at 41 percent of the totals seen prior to the real estate meltdown.

Where recovery stands

Through the end of October, the total market is about 47 percent of the way back to where it was in 2006 or so, the report said. That’s up from just 25 percent in the same month last year, and has risen rapidly in the last three months, when it stood at just 34 percent.

Trulia considers 1.5 million housing starts to be “normal,” and the rate bottomed out in April 2009 at just 478,000, the report said. Meanwhile, normalcy in existing home sales is about 5.5 million, and this factor was at its lowest point in November 2008, when it fell to 3.77 million. Finally, the company considers a normal rate of combined delinquency and foreclosure to be about 5.25 percent of all outstanding home loans, and this problem was largest in January 2010, when it soared to 14.36 percent.

It should be noted, though, that experts consider many of these recovering factors to still be somewhat fragile. Many have said that national issues such as the fiscal cliff, changes to federal regulation of the mortgage industry, and other concerns could still endanger the housing market if they are not handled properly. As such, many consumers are still approaching the market with caution.

Some also believe that the massive strides in recovery might dampen in the next few months, as the market tends to slow a bit every winter in general. Seasonal changes to the housing recovery may not be as large an issue, but could be somewhat discouraging for some potential sellers who have seen their property values improve in the last several months to get them out from under negative equity.

Consumers missing payments on their mortgages, or any other lines of credit, can be extremely detrimental to their financial standings and credit ratings. This factor alone makes up 35 percent of a total credit score, meaning that even one late bill can do major damage. However, this is also true of unfair markings that might inadvertently appear on a borrower’s credit report. Fortunately, working with a credit repair service may help to clear up such a problem and put a borrower back to where they should be.